Asked on 30 Jul 2019
Hi seedly community, I'm a complete newbie to the world of investing and would like to know where do I begin. I have no clue where to start, what to do and when to begin it. Anybody got any tips and tricks for a newbie like me?
Firstly get your insurances settled first. Wealth protection should always be the first step of building a good portfolio.
Too many people are overly eager to grow their wealth, only to lose it to death and illnesses when they strike.
A really basic and simple guideline to how you can manage your money for investment is. Keep your expenses to below 50%. Then set aside 20% for savings, you may put them into different instruments. Set aside another 10-20% for investments. Set aside 5% to get books for self improvement. (This should be a guideline to keep yourself in check if you are over-committing or if you can commit more)
Also remember to start building your emergency fund. (6 months of income)
When investing start off with something you are familiar and have more knowledge on. If you are new in every area, seek professional advice and read up.
Have some guide on the returns you are looking to get and the risk level you are willing to take. This will help shape your portfolio.
For example positive returns may be in the range of:
Equities - 7 to 12%
Bonds - 2 to 3%
High Yield bonds - 5 to 6%
Property - 2 to 4 %
Commodities - 2 to 3%
Time deposits - 1 to 2%
With higher returns also often comes with higher risk. And of course returns can be negative too. So consider your investment outcome and it will help you shape your portfolio.
Read a lot, f.ex this one: https://sias.org.sg/wp-content/uploads/pdf/SIAS_3_Dimension_Guide_Book_To_Investing.pdf
particular reading topics: passive indexing ETFs, compounding effect, brokerage comparisons, emergency funds, debt paydown, www.etf.com
all very important topics.
more on my thinking with some concrete ideas (some more risky, some less) here:
strong advice: avoide buying mutual funds/unit trusts, life insurance, options, CFDs...
use instead: passive indexing ETFs ultra-longterm
Are you also a newbie in the sense that you have no prior knowledge to finance like me? My formal education is in Shipping. So investing and finance as a whole is a complete foreign concept to be, knowing compound interest in school is different from knowing compound interest in finance. Bear in mind, I picked up investing/finance way before I joined the industry. I was trying to figure out how come 25 years mortgage loan has so much more interests than 15 years, this question sent me down the rabbit hole.
There are many many aspects to finance and investing is just one of them. There is also your own savings which is important no matter market bull or bear (good or bad). You just have to keep amassing knowledge in order to learn. You can do it through reading texts or books. But here a few main tips which helped me got through learning investments:
1) know that internet is a big place, a lot of things you read/watch could be just opinions and noise. Even if they are from big broadcasting companies.
2) Knowledge is crucial but mindset is even more important. i.e. my risk appetite is basically how well I can sleep at night even when market turns bad. How well you can sleep at night is important because if you lose sleep over investing, you lose focus at work, etc...
3) To loosely quote Charlie Munger, you have to learn how to sit on your hands and do nothing (don't recklessly react)
4) Investing in itself is a contact sport. You can find stocks every where. Just go out for a walk and you'll find tonnes of companies to INVESTigate: tiger balm = haw par group, take taxi = comfort delgro, buy 4D = wish Singapore Pools is listed.
5) If you find a good stock, don't keep it to yourself, the more people participates in your ideas and buy into it, the more the stock will rise. Picture this, you know everyone through 6 friends (6 degrees of seperation), so if you find a good stock and tell someone about it, chances are it may land into the ears of Warren Buffett and invest based on your idea. Wishful thinking but the idea is there.
Have fun, play the long game, be responsible for your own money. Quality of Life Time spent on investing.
I recently answered a similar question on how a newbie can get started with investing, have a read here: https://seedly.sg/questions/where-should-a-part-time-student-park-his-money-at?aid=17577
There are plenty of free resources available for newbies to get started on investing! In short, you should:
Check everything on the investment checklist before getting started
Do some financial planning and research
Work out a basic portfolio that meets your financial goals. Plan it based on your risk appetite, returns expectation and starting capital.
Do your due diligence researching and planning before you dive into things. Also, do note that your investing portfolio isn't static, do adapt them accordingly to your life stages and expectations. Wishing you all the best in your financial goals :-)